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Mining industry

Newcrest Shares Surge on Goldman Sachs' Sudden Withdrawal of Research Coverage

Strategic Insights

— 1 min read

Investors flocked to Newcrest Mining Limited after the company's biggest shareholder, Goldman Sachs JBWere, unexpectedly suspended its investment research coverage citing unexplained legal and compliance requirements. The sudden move sparked intense speculation on potential takeover activity, balance sheet restructuring, or an equity issue. As a result, Newcrest shares skyrocketed to as high as $22.65, only to drop back to $22.20 by close of trade, a 45 cents (2%) increase.

Key Takeaways:

  • Goldman Sachs JBWere, Newcrest's largest shareholder, suspended its investment research coverage due to unexplained legal and compliance requirements, fueling takeover speculation.
  • Investors believed the move was a conflict of interest removing before merger and acquisition activity involving Newcrest and/or a predator company it is advising on a bid for Newcrest.
  • Shares in Newcrest were pushed to $22.65 in response to speculation, only to drop back to $22.20, up 45 cents (2%) by close of trade.
  • Doubts about takeover activity saw the stock price drop, but it still indicates significant interest in the company's future prospects.
  • Newcrest's senior management was unavailable for comment on the day, with the company's St Kilda Road head office in "lock-down mode".
  • The company's employees reported an "unhappy place" with job losses foreshadowed ahead of New Managing Director Ian Smith's arrival on August 14.
  • Newcrest's portfolio includes more than 57 million ounces of gold resources and 31 million ounces in gold reserves, making it an attractive target for potential predators.
  • A bid for Newcrest is likely to come from one of the big three: Newmont, Barrick, or AngloGold, which have already acquired many Australian mining companies in the past 10 years.

Statistics:

  • Newcrest shares increased by 45 cents (2%) by close of trade.
  • The company's shares reached as high as $22.65 in response to speculation.
  • Newcrest's portfolio includes more than 57 million ounces of gold resources.
  • The company's gold reserves stand at 31 million ounces.
  • Annual production is approximately 1.6 million ounces a year.
  • Newcrest has spent over $2.3 billion developing new mines since 1998.
  • Gearing has increased to over 50%, with the company aiming to decrease it to around 30%.

Sources:

  • "Newcrest Mining Limited" (no date provided)
  • The Australian Financial Review (no date provided)
  • Bloomberg News (no date provided)
  • Goldman Sachs JBWere memo, "Coverage Suspended on Newcrest Mining Limited (NCM)" (6 July 2006)

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